the president’s report on philanthropy and...

The President’s Report on Philanthropy and Endowments

2007–2008

Penn State’S goal is to become the nation’s most

comprehensive, student-centered research university.

1

Your su

pp

ort will h

elp to m

ake a Penn

State ed

ucation

possib

le for thou

sand

s of men

and

wom

en.

I would also call your attention to the performance of the University’s endowment and similar funds. The Penn State Investment Council maintained a disciplined approach to asset allocation during a year when the market environment was especially volatile. Please see pages 21–24 for a summary of how our endowment fared. I can assure you that the Investment Council will continue to act with prudence and care in its role as fiscal steward of endowed gifts. Because endow-ments are sources of funds that students and faculty can count on year after year, they play an especially critical role in Penn State’s abil-ity to offer scholarships, graduate fellowships, faculty chairs and professorships, and the like.

For those of you who have cre-ated endowments at the Univer-sity, a back pocket in this report contains more detailed informa-tion about your investment in our students and faculty.

June 30, 2008, marked eighteen months since the beginning of the For the Future campaign. My sincerest thanks go to Peter Tom-bros, who has done an extraor-dinary job as volunteer campaign chair, and to the remarkable team of Penn State alumni and friends that he has recruited to provide additional volunteer leadership. Please read Peter’s letter on page 3 to learn more about how the philanthropic events of 2007–08 have given the campaign powerful momentum in its initial phase.

A Penn State education is a unique expe-rience that challenges the mind, invigorates the spirit, and leaves an indelible imprint on alumni. Your support will help to make that experience possible for thousands of men and women, whether directly or indirectly. Thank you for your commitment to our University.

a Message from President Spanier

The extraordinary generosity shown to Penn State for the year ending June 30, 2008, will benefit students, faculty, and staff for many years to come. On the pages that fol-low, you will learn more about the scope and impact of private giving. Let’s start with a few of the year’s highlights.

The University received gifts from 74,166 alumni, an all-time high that reflects a broad base of support for the capital cam-paign, For the Future: The Campaign for Penn State Students. The total number of alumni donors represents a 3 percent increase from the previous year, a remarkable achievement at a time when the number of alumni making gifts to their alma maters nationally is flat or in decline.

Giving overall totaled $181.5 million, second only to the previous year’s $190.3 million as the highest philanthropic total in Penn State’s history. These numbers represent actual gifts received and exclude pledges.

The number of gifts received—281,155—also set a record. Many of these gifts came from first-time donors, who typically go on to become long-term bene-factors. This trend points to a promising future for Penn State.

Graham B. Spanier, President The pennSylvania STaTe UniverSiTy

2 0 0 7 – 2 0 0 8

Endowments created through the Trustee Matching Scholarship Program, which aims to keep a Penn State education accessible to all qualified students, regard-less of their financial means, passed the $50 million mark. In creating this important initiative, the Board of Trustees agreed to match 5 percent of the principal of each gift annually with University funds, and combine these matching funds with income from the endowment to effectively double the financial impact of the scholarship. More than 4,600 students benefited from Trustee Scholarships in 2007–08.

P r e S i d e n t ’ S r e P o r t o n P h i l a n t h r o P y a n d e n d o w M e n t S

Ou

r vision is to affi

rm Pen

n State as th

e most com

preh

ensive stu

den

t-centered

research u

niversity in

Am

erica.

I am deeply grateful to the many alumni and friends who invested in Penn State students and faculty in fiscal 2007–08, and in For the Future: The Cam-

paign for Penn State Students. Over these past twelve months we have experi-

enced great success in communicating the campaign’s vision: to affirm Penn

State’s position as America’s most comprehensive student-centered research

university.

The enthusiasm with which Penn Staters have greeted the campaign—

even though it is still in its leadership gifts phase and is not scheduled for a public launch until

2010—is a source of tremendous inspiration to me. I believe the campaign has resonated with

donors because of the broad appeal of its six individual objectives: ensuring student opportunity; enhancing honors education; enriching the student experience; Building faculty strength and

capacity; Fostering discovery and creativity; Sustaining a tradition of quality.

You will find these objectives further defined in this report, and brought to life by personal

examples of Penn Staters who chose to create endowments that support each of these six areas.

As President Spanier has noted in his message, a record number of alumni made gifts in

2007–08. I am pleased to report that, with alumni leading the way, Penn State has successfully

engaged strong support from all of our traditional constituent groups, as shown on page 14. When

we go beyond the past fiscal year to include the eighteen months that have elapsed since the cam-

paign began on January 1, 2007, we find these groups have given or pledged a total of $490 million

toward the six objectives.

As proud as all Penn Staters should be with these results, we must remember that the cam-

paign still has a long way to go. Our nation and our University are certain to face economic chal-

lenges, yet I remain optimistic about the future. Broadly speaking, Americans’ generosity toward

education has proved to be quite resilient, even in a recessionary climate. In only four of the last

forty years has total philanthropy to education declined from the previous year. In addition, I

know that Penn Staters realize the need for student support is never more critical than during a

downward economic cycle. Privately funded scholarships can make an enormous difference to

countless students at such times.

I look forward to your continuing support, and together we will successfully meet any and all

challenges. Thank you.

peTer G. TomBroS, ChairFor the Future: The Campaign for Penn State Students

a Message from the Campaign Chair

32 0 0 7 – 2 0 0 8

“As A single pArent, I was terrified at the thought of going back to school to earn a degree because I have so many financial responsibilities at home. Scholarship money has lessened the burden of acquiring a college degree by giving me more time to study and more time to spend with my son.” —Nicole Gorke, scholarship recipient and Nursing student at Penn State Worthington Scranton

Ensuring Student Opportunity 6

Enhancing Honors Educat ion 7

Enriching the Student 8 Experience

Bui ld ing Faculty Strength 9 and Capacity

Fostering Discovery and 10 Creat iv ity

Sustaining a Tradit ion 11 of Qual i ty

“Being on the receiving end of A scholArship is humbling. I try to ‘repay’ the honor by doing my best athletically and academically. I feel so proud when I’m wearing that Penn State jersey.”—Kiersten Wood, scholarship recipient, Human Development and Family Studies major, and member of the Penn State field hockey team

Ensuring Student Opportunity

Private support for endowed scholarships and

similar awards helps to keep a Penn State edu-

cation within the financial reach of all students

who have the ambition and ability to attend the

University. there is a critical need for such sup-

port. Undergraduates who take out loans to help

finance their Penn State education are graduat-

ing with an average debt of nearly $24,000—and

that figure is rising each year.

robert and Catherine Quinnan of dunmore,

Pennsylvania, have taken a leadership role in

increasing the financial resources available

to students. they endowed the James P. and

Catherine M. gilligan Memorial Scholarship to

benefit undergraduates enrolled at Penn State

worthington Scranton. the endowment, which

assists those who have financial need and

superior academic records, honors the memory

of Catherine Quinnan’s parents, both of whom

were employed by the dunmore School district.

robert Quinnan is a graduate of the University

of detroit and chairs the Penn State worthing-

ton Scranton advisory board. Catherine Quinnan

received her undergraduate and graduate de-

grees from Marywood University in Scranton.

“We’ve been impressed by the ways that the Worthington Scranton campus helps its students who have financial need. When I attended Marywood, I did so with scholar-ship assistance. I was grateful for that help, and I’m now very grateful to give back what I received.”

—Cather iNe QuiNNaN

“Penn State Worthington Scranton is very similar to the type of universities Cathie and I each attended in that there are many first-generation students enrolled. The scholarship enabled us to aid those stu-dents and contribute to the economic de-velopment of northeastern Pennsylvania.”

—robert QuiNNaN


7

toP right: riCh and ann Marie whitney

toP leFt: ryan wood iS a reCiPient oF the riCh and ann Marie whitney trUStee SCholarShiP.

the Schreyer honors College, which owes its creation in 1997 to a visionary endowed gift, is one of Penn State’s keystone academic programs, attracting undergraduates of ex-ceptional ability from around the nation and abroad.

rich and ann Marie whitney of Manhattan Beach, California, know that in order to com-pete successfully for the very best students, the Schreyer honors College needs addi-tional private support. rich himself was an honors student, graduating from Penn State in 1989 as a University Scholar in the Smeal College of Business. he now heads his own private equity investment firm.

the whitneys created the rich and ann Marie whitney trustee Scholarship to ben-efit honors students. trustee Scholarships, designed to keep a Penn State education accessible to all qualified students regardless

of their financial means, have a unique matching component: the University matches 5 percent of the principal of each gift annually and combines these funds with income from the endowment to effectively double the financial impact of the scholarship.

“We view our gift as an investment in the future of exceptionally talented young men and women. For many, without some form of assistance, the cost of a Penn State edu-cation would be prohibitive or impose a very significant burden on their family. For each, their engagement with the honors college will put them on a path that of-fers the opportunity to impact the future of Penn State, their chosen professions, their communities, and quite possibly the world.”

—riCh aNd aNN Marie WhitNey

Enhancing Honors Education

FaCing Page toP: MeliSSa Cardone iS a 2007–08 reCiPient oF the gilligan MeMorial SCholarShiP.

FaCing Page BottoM: roBert and Catherine QUinnan

2 0 0 7 – 2 0 0 8

8

Students can reach their fullest potential for academic achievement and personal growth when they have opportunities for community service, creative expression, global involvement, and similar experiences that enrich their education. the raymond a. Bowers Program for excellence in design and Construction of the Built environment provides such enrichment for students in the departments of architectural engineering, architecture, and landscape architecture.

raymond Bowers, a 1931 Penn State gradu-ate in architectural engineering, had a wealth of practical experience as head of lewis C. Bowers & Sons, a leading new Jersey-based building design and construc-tion firm. years before he passed away, he used gift planning to establish the endow-ment that today bears his name in order to help students better prepare to become leaders in the design and construction indus-try. the endowment supports interdisciplin-ary programming and projects, and exposes students to best professional practices within the industry.

income from the Bowers endowment sup-ported design and construction of Morning-Star, a house built by the Penn State Solar decathlon team. MorningStar won fourth place in the department of energy’s 2007 Solar decathlon. a team of students and faculty took two years to build an entirely solar-powered home to be entered into the international competition. the house will now be used as an educational tool at Penn State’s Center for Sustainability.

Enriching the Student Experience

toP: ChiMay J. anUMBa, ProFeSSor and head oF the dePartMent oF arChiteCtUral engineering, Served aS adviSer and Mentor to the MorningStar teaM.

BottoM: rayMond a. BowerS


9

Building Faculty Strength and Capacity

a truly exceptional education is one that offers students opportunities to study with the finest teachers and researchers—scholars who have achieved preeminence in their fields and whose work can inspire similar achievements in their students. endowed chairs and professorships enable Penn State to recruit and retain scientists, artists, en-gineers, and many other kinds of world-re-nowned scholars. Similarly, endowed gradu-ate assistantships and fellowships enable the University to attract top-flight graduate students, who themselves are only a few years away from establishing distinguished careers in business and industry, public ser-vice, education, and many other fields.

donald and virginia davis endowed the don davis Professorship in ethics, in the College of Communications. don davis is a 1942 Penn State graduate in Journalism. the davis Professor is Patrick Parsons, who coordinates an ethics-across-the-curriculum program that encourages students and faculty to not only discuss ethical principles, but also live them.

“The whole impact of a professorship in ethics—not only the impact it would have on the College of Communications but how that impact would spread throughout the University—I just thought it would be a great idea.”

—doN davis

toP right: don daviS

toP leFt: PatriCk ParSonS, don daviS ProFeSSor in ethiCS, iS a widely reCognized aUthority on MaSS Media ethiCS.

2 0 0 7 – 2 0 0 8

1 0

toP: niCholaS and gelSa (“dolly”) PeliCk

BottoM: Melik deMirel iS aSSiStant ProFeSSor oF engineering SCienCe and MeChaniCS.

Penn State students and faculty thrive in an atmosphere of intellectual discovery. Path-ways for discovery are especially diverse in an interdisciplinary environment, where tra-ditional boundaries of learning are pushed aside in the quest for new knowledge and new solutions to old problems. Ultimately, such a commitment to innovation allows Penn State to better serve society.

Philanthropy plays a critical role in encour-aging and enabling interdisciplinary schol-arship and creativity, as exemplified by the nicholas and gelsa Pelick Biotechnology innovation Fund. the Pelick Fund provides seed grants to support short-term interdisci-plinary research on high-risk and fundamen-tally new ideas in the life sciences, such as Melik demirel’s investigations in biomateri-als, polymers, nanofabrication, protein en-gineering, biosensors, and molecular model-ing. once they are up and running, the most promising research projects can then be po-sitioned to receive long-term support from more traditional funding sources, such as public agencies and corporate foundations.

nicholas Pelick, who holds bachelor’s and master’s degrees from Penn State, is a re-tired co-founder of a research and develop-ment company.

“Dolly and I believe that this endow-ment is important to the life sciences at Penn State for the continuity of short-term research of novel ideas to expan-sion to long-term research. This brings in much-needed outside funding to allow faculty to excel in the research of new ideas, and the opportunity to ad-vance into new areas of biological and medical research.”

—NiCholas Pel iCK

Fostering Discovery and Creativity


1 1

toP: edward and Jeanne arnold

BottoM: gary d. Ceneviva, M.d., StaFF PhySiCian in the PediatriC intenSive Care Unit at Penn State Milton S. herShey MediCal Center, iS direCtor oF the hUMMingBird PrograM.

Penn State Milton S. hershey Medical Center has earned high marks in such diverse areas as patient care, operating efficiency, and special-ized fields of research and treatment. Most recently, Penn State hershey Children’s hospital is listed in U.S. News & World Report’s 2008 edition of “america’s Best Children’s hospitals.” But sustaining a tradition of quality requires continuous support.

Penn State hershey Medical Center aims to complete construction of a new children’s hospital by 2012 with the help of $65 million in philanthropy. the new facility gives high prior-ity to a family-focused environment that affords more privacy for families and patients. in sup-port of the new hospital, edward and Jeanne arnold of lebanon, Pennsylvania, have created an endowment that provides seed money for the hummingbird Program, a service that offers comprehensive medical, psychological, social, and spiritual support for children facing life-threatening, complex medical conditions, and for their families.

the arnolds are vice chairs of the medical center campaign committee, and Jeanne arnold serves on the Penn State hershey Children’s hospital executive committee.

“Ed and I became interested in support-ing a program that would enhance pa-tient care through our involvement with the Children’s Hospital. The opportunity for the Hummingbird Program was pre-sented to us as a suggestion from parents who wanted a palliative-care program. We met with two mothers who shared their stories, and then we saw for ourselves the need for underwriting and funding a pro-gram like this. Dr. Ceneviva also was very interested in such a program. The hum-mingbird is such a beautiful, magical little bird—a little fighter—that we felt it was a perfect symbol for these kids.”

—JeaNNe arNold

Sustaining a Tradit ion of Qual ity

2 0 0 7 – 2 0 0 8


“the schreyer honors college has given me the chance to learn from great professors and scientists—people who are proven experts in their field.” —anthony tierno, scholarship recipient and Science major (Life Science option)

Summary of Gif ts 1 4

Planning for the Future 1 6

Endowment Stewardship 2 0

Budget Summaries 2 8

Execut ive Committee 3 0

52%

23%

16%

9%

27%

24% 19%

17%

5%3%3%

1%1%

Sources of gifts received 2007–08

where the $181.5 million came from

SOURCES AMOUNTS NUMBEROFDONORS

Individuals $94,319,974 153,594 Alumni $64,472,983 74,166 Friends 29,846,991 79,428

Corporations 42,066, 747 6,124 Foundations 29,441,345 490 Organizations 15,642,675 2,903

total $181,470,741 163,111

where the $181.5 million went

PURPOSES AMOUNTS

Student aid $49,074,276

Other 44,216,016 Property, buildings, 34,374,122

equipment

Research 31,144,190 Faculty resources 8,583,589 Academic divisions 5,917,787 Public service 5,060,144

and extension

Unrestricted 1,661,413 (University-wide)

Library resources 1,439,204 total $181,470,741

designated Purposes of gifts received 2007–08

1 4

Summ

ary of Gifts


gifts designated to Specific Units 2007–08 growth in Private Support and donor Base

College of Agricultural Sciences $11,473,585College of Arts and Architecture/University Arts Services $5,287,578Smeal College of Business $8,413,119College of Communications $2,636,217The Dickinson School of Law $3,953,058College of Earth and Mineral Sciences $12,017,380College of Education $2,724,947College of Engineering $18,192,094College of Health and Human Development $9,018,584College of Information Sciences and Technology $1,382,750College of the Liberal Arts $8,353,366College of Medicine/ Medical Center $23,281,594Eberly College of Science $6,714,351Penn State Abington $1,315,158Penn State Altoona $804,851Penn State Beaver $234,432Penn State Berks $432,263Penn State Brandywine $300,856Penn State DuBois $464,776

Penn State Erie, The Behrend College $2,246,916Penn State Fayette, The Eberly Campus $570,574Penn State Great Valley $344,298Penn State Greater Allegheny $1,403,552Penn State Harrisburg $725,993Penn State Hazleton $466,386Penn State Lehigh Valley $237,577Penn State Mont Alto $587,392Penn State New Kensington $210,134Penn State Schuylkill $300,254Penn State Shenango $548,699Penn State Wilkes-Barre $605,376Penn State Worthington Scranton $580,300Penn State York $510,102Intercollegiate Athletics $27,938,748Outreach and Cooperative Extension $6,484,507Research and Graduate Studies $1,655,747Schreyer Honors College $3,283,639University Libraries $2,234,936Other*$13,534,652

*Includes University-wide scholarships, graduate fellowships, and student loan funds; International Programs; Office of Student Affairs; Office of Educational Equity.

0

50

100

150

200

99 00 01 02 03 04 05 06 07 08

151.1

170.8176.9

180.7181.3

151.3

130.9

165.2

190.3181.5

( Y E A R )

in millions of dollars

GiFTSRECEivED

0

50

100

150

200

250

300

99 00 01 02 03 04 05 06 07 08 ( Y E A R )

213.3198.8

197.9196.4

170.3

200.9

163.4173.0

284.7277.5


NEw

COMMiTMENTS:

GiFTSAND

PlEDGES

99 00 01 02 03 04 05 06 07 08

118,089

116,053116,971

124,519122,539

120,680

132,931132,791

143,517

163,111

( Y E A R )0

50

100

150

200

NUMBERS

OFDONORS

1 52 0 0 7 – 2 0 0 8

deferred Giving in 2007–08

realized Bequests $13,312,477

gift Annuities $2,016,841

charitable remainder trusts $6,067,917

charitable lead trusts $139,511

Planning for the Future


A deferredgift is simply a commitment made today that will provide future benefits to the University.

Deferred gifts accounted for 12 percent of all giving to Penn State in 2007–08. The University benefited from more than $8 million in gift annuities, charitable re-mainder trusts, and other life income gifts. Such gifts carry substantial income, estate, and gift tax advantages. In addition, they are often designated to establish endow-ments, which offer perpetual support for programs designated by donors. Endowment funds are usually named for donors or other individuals specified by donors.

One of the easiest ways for benefactors to ensure that their financial support will continue for years to come is by including Penn State in their wills. This past year, Penn State received more than $13 million in realized bequests from estate distributions, primarily designated for endowments.

Benefactors can work with the University to create a Statement of Intent, a simple document that indicates how the funds are to be used. Bequests, for example, are typically made in several ways: A specific amount, a percentage of an estate, or the entire remainder of an estate can be left to the University. One can also create a con-tingent bequest that specifies monies will come to Penn State upon the occurrence of certain circumstances. For example, a bequest can go to an individual or come to Penn State in the event the person named is no longer living. Bequests can be directed to a specific purpose or designated as “unrestricted” to Penn State.

0 10 20 30 40 50

Millions of dollars

deferred giving 1998–2008 (Year ending June 30)

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

$22.4

27.6

18.2

26.6

24.3

48.1

30.0

14.4

21.1

25.2

21.5

deferred giving

1 72 0 0 7 – 2 0 0 8

endowment Minimums

Penn State’S Board oF trUSteeS

has established minimum support

levels for various types of

endowments to guarantee that

income will be adequate to achieve

the benefactor’s intent—now and

in the future. these endowments

may be named in recognition of

the generosity and vision of the

donors, or in honor or memory of

persons of the donors’ choice.

named endowments stand in

perpetuity as landmarks.

endowment cAtegory minimum gift

Faculty support

chancellor’s chair $5,000,000dean’s chair $5,000,000department head’s chair $3,000,000faculty chair $2,000,000professorship $1,000,000career development professorship $500,000

Graduate student aid

distinguished graduate fellowship $250,000graduate scholarship $50,000

undergraduate student aid

trustee matching scholarship $50,000college/campus scholarship $50,000honors college scholarship $50,000destiny scholarship $50,000enrichment scholarship $50,000renaissance scholarship $30,000

other endowments

lectureship $100,000research $50,000program support $25,000libraries $25,000program Award $20,000

A deferred gift can also perpetuate current giving. This is an effective way to transform an existing gift into an enduring legacy. For example, if a benefactor’s cur-rent giving is $5,000 a year, the creation of a $100,000 endowment through a bequest can generate approximately $5,000 in income annually so that current giving continues indefinitely. Such a gift serves as a lasting tribute to one’s belief in higher education and as the capstone of one’s legacy to Penn State. Thus, the impact of a benefactor’s generosity extends far beyond a lifetime.

A gift to Penn State through a will or a life income gift may have significant income tax benefits and qualify for an estate tax charitable deduction. For informa-tion about gift planning, contact Michael J. Degenhart, Director of Gift Planning, The Pennsylvania State University, 214 The 103 Building, University Park, PA 16802-7001; 1-888-800-9170; E-mail: [email protected].

1 8 P r e S i d e n t ’ S r e P o r t o n P h i l a n t h r o P y a n d e n d o w M e n t S

Endowments are created by blending a donor’s vision with Penn State’s goals and objectives. While endowments strengthen the University now, their premise is to plan for and strengthen Penn State’s future. Endowments can be created through gifts of cash, stock, or deferred gifts.

Creating endowments

“i’m inspired to work hArd because someone has given me this opportunity, and I hope that I’ll be able to return the favor to future generations of Penn Staters.” —alison Kilmartin, scholarship recipient and Penn State Dickinson School of Law student

End

owm

ent Steward

ship


0

10

20

30

40

50

60

70

80

99 00 01 02 03 04 05 06 07 08

64.961.7

58.5

69.172.8

56.5

42.4

51.455.2

70.2

( Y E A R )


GiFTSTO

ENDOwMENT

Endowedgiftsareheldby Penn State in perpetuity. The initial gift is invested, and a portion of the average annual investment return is spent for the purpose des-ignated by the donor. The remaining income is added to the principal as protection against inflation. Thus an endowed gift today will have relatively the same value for future generations.

The Long-Term Investment Pool is Penn State’s endowment portfolio into which endowed funds established at the University are invested. This commingled pool oper-ates much like a mutual fund. Each endowment owns a number of units in the pool, just as an individual would purchase shares in a mutual fund. And as with a mutual fund, the value of each unit at the time funds are invested in the pool determines how many units an individual fund acquires.

Penn State strives to be a good steward of its endowed gifts and fol-lows a prudent management philoso-phy in investing these gifts so that they maintain their value in real terms over time. The University’s Board of Trustees has established four basic endowment management principles to guide the University’s Investment Council.

These four principles ensure that the spending power of each endowment gift will be maintained in the face of economic fluctuations.

endowment overview

Basic endowment management principles

1. Provide sufficient current and future income to meet the University’s spending objectives and enhance its mission.

2. Focus on long-term performance.

3. Accept a reasonable and prudent level of risk while maximizing “total” return.

4. Diversify investments to reduce risk.

(Year ending

June 30)

2 12 0 0 7 – 2 0 0 8

investment Management Update

Penn State’s endowment investments consist of a diversified portfolio of public equi-ties, bonds, private capital, and hedge funds in addition to real assets. In managing our investments, we adhere to a prudent, rational, long-term strategy that seeks to main-tain steady growth while minimizing the effects of volatile market fluctuations.

For many years the University has, as a rule, provided 5 percent of the pooled endowment’s five-year average market value for spending. However, given prospects for modest investment market returns, the payout rate will be reduced incrementally over a multiyear period. Beginning with 2007, the payout is being decreased 0.1 per-cent annually until 4.5 percent is achieved in 2012. The University’s spending policy balances out the “peaks” and “troughs” in the investment markets, saving a portion of the earnings in the good years to offset the less profitable years—thus providing generous current spending while preserving future purchasing power. This is known as “intergenerational equity.”

Millions of dollars

$ 627

791

1,004 (1 billion)

986

943

965

1,107 (1.11 billion)

1,231 (1.23 billion)

1,390 (1.39 billion)

1,669 (1.67 billion)

1,616 (1.62 billion)

1998 580 47

1999 731 60

2000 927 77

2001 899 87

2002 842 101

2003 882 83

2004 1,007 100

2005 1,128 103

2006 1,280 110

2007 1,537 132

2008 1,488 128

As of the end of fiscal 2008, endowment and similar funds were valued at $1.62 billion, of which $1.49 billion was invested in the Long-Term Investment Pool. Similar funds, which include charitable remainder trusts, charitable gift annuities, and other life income funds in addition to some donor-restricted funds, represented $128 million in assets that are not directly invested in the Long-Term Investment Pool. These amounts reflect the impact of investment returns and generous giving, net of consistent support for scholarships and University programs.

ltiP siMilar FuNds

long-term investment Pool (ltiP) similar funds


Market value of Penn State’s endowment and Similar Funds (Fiscal year ending June 30)

2 32 0 0 7 – 2 0 0 8

At the end of fiscal year 2008, the endowment and similar funds were valued at nearly $1.6 billion. This represented a one-year net decrease of $53 million, and a five-year net increase of $509 million. Over this same period, the endowment has provided $284 million of program support, including $60 million in fiscal 2008. For the year ending June 30, 2008, the endowment returned -1.9 percent and has averaged 12.1 per-cent over the last five years. In the longer term, Penn State’s endowment has averaged 9.7 percent per year, net of gifts and expenses, since June 30, 1988.

These results demonstrate long-term growth across various financial ups and downs, such as the bull market of the 1990s, the steep decline at the turn of the century and subsequent economic recovery, and the recent downturn due to the credit crisis. This, in turn, has allowed the endowment to support program spending, such as scholarships and faculty positions, while maintaining real, inflation-adjusted growth for future generations.

Looking toward the future, the steady growth of the world economy has height-ened inflation concerns, especially natural resources such as oil and gas. With ap-proximately 15 percent of our investments regarded as inflation sensitive, Penn State’s diversified endowment portfolio continues to be appropriately invested for long-term growth and sustainable spending.

50%

27%

23%

where Penn State invested its endowed funds

Public Equities

Fixed Income Private Capital

(As of June 30, 2008)

The Penn State endowment portfolio is broadly diversified, with 23 percent in fixed income as of June 30, 2008; 50 percent in public equities (both U.S. and non-U.S.); and 27 percent in a variety of other (alternative) investments, including real estate, private capital, venture capital, and energy. The majority of the endowment’s assets are equity-type investments that, over the long term, generate returns in excess of inflation in order to preserve the endowment’s purchasing power for future generations.

In the year ending June 30, 2008, investment market returns for equities turned negative after several years of positive performance, while fixed income returns were positive for the second consecutive year. Bonds, as measured by the Lehman Brothers Bond Index, earned a total return of 7.1 percent in fiscal 2008 while public equities, as measured by the All Country World Index, returned -6.6 percent. Penn State’s private capital, comprised of private partnership investments, outperformed both public equities and bonds, with private equity and venture partnerships gaining 12.4 percent and 11.5 percent, respectively.

endowment asset Mix


12.1

7.5

9.7

-1.9

20-year

10-year

5-year

1-year

AvERAGEANNUAlizED

TOTAlRETURNS

FORPERiODSENDiNG

JUNE30,2008

(Net of fees)

Total returns include interest, dividends, and market appreciation

Penn State’s endowment earned an investment return of -1.9 percent, excluding the impact of new gifts and spending. While stock market returns often fluctuate from year to year, the endowment’s well-diversified portfolio can weather short-term fluctuations and generate positive returns over long periods of time. Net of all fees and expenses, the Penn State endowment has averaged 7.5 percent per year over the last ten years, and 9.7 percent over the last twenty years, allowing the endowment to maintain steady inflation-adjusted spending and to achieve long-term intergenerational equity.

Penn State investment Council

Penn State’S Board oF trUSteeS

created the investment Council

in response to the University’s

increasing asset base and complex

investment strategies. the council

provides direct oversight of

the endowment and long-term

investment program, and regularly

reviews asset allocation, new asset

classes, investment strategies, and

manager performance.

c o u n c i l m e m B e r s

Gary schultz, Chair senior vice president for finance and business/treasurer, the pennsylvania state university

david branigan

executive director, office of investment management, the pennsylvania state university

timothy J. Crowemanaging director, Anchor point capital llc

Carmen Gigliotti

managing director, private market group, dupont capital management

edward r. hintz Jr.

president, hhr Asset management

arthur d. Miltenberger

vice president and chief financial officer (retired), r. k. mellon & sons

J. david rogers

chief executive officer, J. d. capital management

linda b. strumpf

vice president and chief investment officer, the ford foundation

long-term investment Performance of endowment

“BecAuse of scholArship support, I will be the first person in my family to graduate from an institution like Penn State.”—Mark lowery, scholarship recipient and Agricultural and Extension Education major

“As An internAtionAl student At penn stAte greAter Allegheny, I enjoyed great relationships with professors who really cared about my success. They offered a hands-on education that reinforced what I learned from the textbook.” —antony Palocaren, scholarship recipient and Engineering Science major

“thAnks to generous donors who created my scholarship, I have to work only part-time during the academic year. And I can par-ticipate in extracurricular activities like Thon, which gives me a sense of purpose and pride.” —lindsay Miller, scholarship recipient and Marketing major

33.1%

26.1%

1.1% 2.4%

total University operating Budget 2007–08

income

MilliONSOFDOllARS

Tuition and fees $1,128.5

Medical Center/Clinic 891.1 Restricted funds* 586.4 State appropriation 334.2 Auxiliary enterprises 297.2 Philanthropy and other 155.7

Agricultural (federal) 18.4

total $3,411.5

expenditures

MilliONSOFDOllARS

Instruction and academic support $912.5

Medical Center/Clinic 891.1 Research 526.4 Auxiliary enterprises 297.2 Institutional support 256.1 Physical Plant 177.2 Public service 142.8 Pennsylvania College of Technology 87.8

(General funds)

Student services 81.9 Student aid 38.5

total $3,411.5

17.2%

9.8%

8.7%4.6%

0.5%

26.8%

26.1% 15.4%

8.7%

7.5%

5.2%

4.2%2.6%

*primarily sponsored contracts and research grants

2 8

Bud

get Summ

aries


the State’s Share of Penn State’s Budget

Y E A R TOTA l B U D G E T S TAT E A P P R O P R i AT i O N S P E R C E N T O F TOTA l

2008–09 $3,607,440,000 $338,375,000* 9.4%

2007–08 3,411,528,000 334,230,000* 9.8%

2006–07 3,209,165,000 327,715,000* 10.2%

2005–06 3,044,868,000 312,026,000* 10.2%

2004–05 2,786,403,000 317,179,000 11.4%

2003–04 2,560,309,000 307,844,000 12.0%

2002–03 2,402,717,000 322,592,000 13.4%

2001–02 2,294,015,000 334,813,000 14.6%

2000–01 2,150,394,000 331,949,000 15.4%

1999–00 2,011,084,000 314,134,000 15.6%

*Excludes state and federal medical assistance funding provided to Penn State Milton S. Hershey Medical Center through the Pennsylvania Department of Public Welfare.

2 92 0 0 7 – 2 0 0 8

“When I received a scholarship, it made me feel like Penn State truly cared about my education and my future success. That is the kind of university I want to be part of.” —rafiattinuke “shade” adebowale, scholarship recipient and Health and Human Development student

Executive C

omm

ittee


executive Committee For the Future: The Campaign for Penn State Students

Peter G . toMbros

Campaign Chair

e . lee beard

Campaign Vice Chair

Chair, Campus Committees

edWard J . beCKWith

Chair, Planned Giving Advisory Council

JaMes s . broadhurst

Chair, Board of Trustees, The Pennsylvania State University

Peter M. Carl iNo

Chair, The Penn State Milton S. Hershey Medical Center

l iNda J . Gall

Chair, Stewardship Committee

steve a . GarbaN

Trustee Liaison

Member, Board of Trustees, The Pennsylvania State University

edWard r . h iNtz

Honorary Campaign Chair

3 12 0 0 7 – 2 0 0 8

robert e . Poole

Chair, Leadership Gifts Committee

Cather iNe shultz re iN

Chair, Corporate Relations Committee

Will iaM a . sChreyer


bruCe r . Miller

Campaign Vice Chair

Chair, College Committees

arthur J . NaGle


JosePh v. PaterNo


riChard K . struthers

At-Large Member

JohN K . tsu i

At-Large Member

Martha b . JordaN

Chair, Annual Giving Committee

edWard P. JuNKer i i i

At-Large Member

JeFFery l . K iNG

At-Large Member


Gary C . sChultz

Senior Vice President for Finance and Business/Treasurer, The Pennsylvania State University

rodNey P. K irsCh

Senior Vice President for Development and Alumni Relations, The Pennsylvania State University

GrahaM b . sPaNier

President, The Pennsylvania State University

rodNey a . er iCKsoN

Executive Vice President and Provost, The Pennsylvania State University

ex officio Members

3 3

ThiSPUBliCATiONiSAvAilABlEiNAlTERNATivEMEDiAONREqUEST.

ThePennsylvaniaStateUniversityiscommittedtothepolicythatallpersons

shallhaveequalaccesstoprograms,facilities,admission,andemployment

withoutregardtopersonalcharacteristicsnotrelatedtoability,performance,or

qualificationsasdeterminedbyUniversitypolicyorbystateorfederalauthorities.

itisthepolicyoftheUniversitytomaintainanacademicandworkenvironment

freeofdiscrimination,includingharassment.ThePennsylvaniaStateUniversity

prohibitsdiscriminationandharassmentagainstanypersonbecauseofage,

this publication can also be found on the web at:

president.psu.edu/philanthropy

For more information about philanthropy at Penn State contact:

rodney P. kirsch

Senior vice President for development and alumni relations

the Pennsylvania State University

116 old Main

University Park, Pa 16802-1501

814-863-4826 [email protected]

ancestry,color,disabilityorhandicap,nationalorigin,race,religiouscreed,sex,

sexualorientation,genderidentity,orveteranstatus.Discriminationorharassment

againstfaculty,staff,orstudentswillnotbetoleratedatThePennsylvaniaState

University.Directallinquiriesregardingthenondiscriminationpolicytothe

AffirmativeActionDirector,ThePennsylvaniaStateUniversity,328BouckeBuilding,

UniversityPark,PA16802-5901;Tel814-865-4700/v,814-863-1150/TTY.

ProducedbythePennStateDepartmentofUniversityPublications.U.Ed.DEv09-12

“my mother works very hArd, and the scholarships I receive make her life so much easier and less stressful. And I’m able to get the most out of my education.”—Kristin Maclean, scholarship recipient and Psychology major

“The scholarship has shown me that alumni care about their alma mater and want current students to share in their success.”

the president’s report on p h i l a n t h r o p y a n d e n d o w m e n t s

2 0 0 7 – 2 0 0 8

the president’s report on philanthropy and...

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